New COO De Castro Reorganizing Yahoo Ad Sales

Restructuring is a big company’s version of pivoting. When there are missteps at big firms, senior management teams typically believe it’s an issue of organization structure / market fit. This is very different than in startups, where product-market fit is (in)famous.

In startup land, there’s an emphasis on creating products that have market demand. In Bigco land, it’s assumed that product-market fit has been found and scaled up to multi-million dollar products and when the firm stumbles in the midst of competition, it’s seen as an issue of having the wrong org structure for the market in which the firm is competing. Perhaps the market has changed and clients want something different or competitors have done something to alter the market dynamics. Regardless of the reason, business is down and a structural change needs to be made. (This is why you see firms in the doldrums restructure every couple of years).

Let me give you an easy, made up example: Apple is selling their iPhone 5 to the entire world. They look at China and they realize that sales are low because the Chinese value a different feature set. Larger screens, different app stores, etc. Apple decides they really want to become number one in China but in order to do so, they have to create a different product for that market with a feature set that’s optimized for demand there. This requires setting up decentralized R&D (vs their current centralized R&D approach). They set up a branch in Asia that cranks out “Asian iPhones” with larger screens. They close the gap with Android in China by becoming a more decentralized organization.

So going back to Yahoo, does this reorganization of the ad sales group put them on a path to better organizational structure / market fit? Well, there’s some data from Google that Mayer and De Castro can leverage. However, this has to be balanced within the context and resources at Yahoo. Their culture and capabilities may dictate how smoothly things go while instituting the change.

I have the pick of the litter in choosing a sports analogy for this situation because there are so many examples where a great player gets traded and put into a system that is not a fit for them. Or where teams change their scheme and it takes a couple of years for everyone to get used to the new scheme.

So that’s some background info on reorganizations. I’m sure that De Castro is also trying to make his mark on the firm as well so there’s probably a bit of that going on too but that’s given.